The healthcare field is the subject of a host of federal statutes, regulations, guidelines, interpretive information, and model guidance. There are a considerable number of statutes and regulations that have an impact on the delivery of healthcare services. A statute is legislative enactment that has been signed into law. A statute either directs someone to take action, grants authority to act in certain situations, or to refrain from doing so. Statutes are not self-enforcing. Someone must be authorized to do so to take action. A statute may authorize the Department of Health and Human Services to take action, and it is up to the department to implement the law. Regulations, or rules, are made by administrative personnel to whom legislatures have delegated such responsibilities. It is a tool for developing policies, procedures, and practice routines that track the expectations of regulatory agencies and departments. The statutory and regulatory requirements are subject to judicial interpretation.

A very important element of healthcare management is to understand the key regulatory environment. One government statute that effects patient healthcare is the Anti-Kickback Statute. The Medicare and Medicaid Patient Protection Act of 1987 (the “Anti-Kickback Statute”), has been enacted to prevent healthcare providers from inappropriately profiting from referrals. The government regards any type of incentive for a referral as a potential violation of this law because the opportunity to reap financial benefits may tempt providers to make referrals that are not medically necessary, thereby driving up healthcare costs and potentially putting patient’s health at risk. The Anti-Kickback statute is a criminal statute. Originally enacted almost 30 years ago, the statute prohibits any knowing or willful solicitation or acceptance of any type of remuneration to induce referrals for health services that are reimbursable by the Federal government. For example, a provider may not routinely waive a patient’s co-payment or deductible. The government would view this as an inducement for the patient to choose the provider for reasons other than medical benefit. While these prohibitions originally were limited to services reimbursed by the Medicare or Medicaid programs, recent legislation expanded the statute’s reach to any Federal healthcare program. Because the Anti-Kickback statute is a criminal statute, violations of it are considered felonies, with criminal penalties of up to $25,000 in fines and five years in prison. Routinely waiving copayments and deductibles violates the statute and ordinarily results in a sanction. However, a safe harbor has been created wherein a provider granting such a waiver based on a patient’s financial need would not be sanctioned. The enactment of the 1996 Health Insurance Portability and Accountability Act (HIPAA) added another level of complexity to the Anti-Kickback statute and its accompanying safe harbors. HIPAA mandated that the OIG (Office of Inspector General) furnish advisory opinions to requesting providers that are either in an arrangement or contemplating an arrangement that may not fit squarely within the law. For a fee, the OIG would analyze the arrangement and determine whether it could violate the law and whether the OIG would impose sanctions on the arrangement. In many of its advisory opinions published over the past few years, the OIG has stated that it would not impose sanctions, even though it found that the arrangement in question could violate the statute. A common reason the OIG has given for not imposing sanctions has been that the arrangement provides an overall benefit to the community. Healthcare finance professionals need to ensure that all business transactions comply with the Anti-Kickback statute.

The Anti-Kickback statute effects the patient. The main aim of this statute is to improve patient safety, provide satisfaction and avoid risk. The result of the acquisition of a physician’s practice would serve to interfere with the physician’s subsequent judgment of what is the most appropriate care for a patient. It would also interfere with a beneficiary’s freedom of choice of providers.

Physicians have direct patient care responsibilities. Any incentive payments to such physicians that are either tied to overall costs of patient treatment or based on a patient’s length of stay could reduce patient services. Also, the profits generated by cost savings may induce investor-physicians to reduce services to patients. Health care programs operate on the good faith and honesty of health care providers. It is important to ensure that quality services are provided at the hospital. The Anti-Kickback statute helps the government not to tolerate misuse of the reimbursement systems for financial gain and hold the responsible parties accountable for their conduct. Such conducts can also prompt patient complaints. The hospitals and physicians who are interested in structuring gainsharing arrangements might adversely affect patient care.

The Anti-Kickback statute creates a protective umbrella, a zone in which patients are protected so that the best health care is provided. This statute helps to improve efficiency, improve quality of care, and provide better information for patients and physicians. The Anti-Kickback statute is not only a criminal prohibition against payments made purposefully to induce or reward the referral or generation of Federal health care business, it also addresses the offer or payment of anything of value in return for purchasing, leasing, ordering of any item or service reimbursable in whole or part by a Federal health care program. It helps to promote quality and efficient delivery of health care transparency regarding health care quality and price.

There are millions of uninsured patients who are unable to pay their hospital bills. Giving a discount on hospital charges to an uninsured patient does not implicate the Federal Anti-Kickback statute. Most need-based discounting policies are aimed at making health care more affordable for the millions of uninsured citizens who are not referral sources for the hospital. For discounts offered to these uninsured patients, the Anti-Kickback statute simply does not apply. It is fully supported that a patient’s financial need is not a barrier to health care. Furthermore, OIG legal authorities permit hospitals and others to offer bonafide discounts to uninsured patients and to Medicare or Medicaid beneficiaries who cannot afford their health care bills. The Anti-Kickback statute is concerned about improper financial incentives that often lead to abuses, such as overutilization, increased program costs, corruption of medical-decision making, and unfair competition.

There are risk management implications of this statute. There are risks associated with the Anti-Kickback statute and its good to prevent them. Rather than be an imposing and daunting challenge to understand, the outcome can be development of risk management systems to guide the delivery of health care. This fact is recognized that such statutes are an important attribute of the risk management professional. For example there are potential risks under the Anti-Kickback statute arising from hospital relationships. In case of joint ventures there has been a long-standing concern about arrangements between those in a position to refer or generate Federal health care program business and those providing items or services reimbursable by Federal health care programs. In the context of joint ventures, the chief concern is that remuneration from a joint venture might be a disguised payment for past or future referrals to the venture or to one or more of its participants. The risk management should be done by having a knowledge of the manner in which joint venture participants are selected and retained, the manner in which the joint venture is structured and the manner in which the investments are financed and profits are distributed. Another area of risk is the hospital’s compensation arrangements with physicians. Although many compensation arrangements are legitimate business arrangements, but may violate the Anti-Kickback statute if one purpose of the arrangement is to compensate physicians for past or future referrals. Risk management is to follow the general rule of thumb that any remuneration flowing between hospitals and physicians should be at fair market value for actual and necessary items furnished or services.

Risk management is also needed in entities such as in cases where a hospital is the referral source for other providers or suppliers. It would be prudent for the hospital to scrutinize carefully any remuneration flowing to the hospital from the provider or supplier to ensure compliance with the Anti-Kickback statute. Also, many hospitals provide incentives to recruit a physician or other health care professional to join the hospital’s medical staff and provide medical services to the surrounding community. When used to bring needed physicians to an underserved community, these arrangements can benefit patients. However, recruitment arrangements pose substantial fraud and abuse risk. This can be prevented by having knowledge of the size and value of the recruitment benefit, the duration of payout of the recruitment benefit, the practice of the existing physician and the need for the recruitment. Another area where risk management is to be applied is when the discounts are given. The Anti-Kickback statute contains an exception for discounts offered to customers that submit claims to the Federal health care programs. The discounts should be properly disclosed and accurately reported. The regulation provides that the discount must be given at the time of sale or, in certain cases, it should be set at the time of sale. This will help in risk management. It is also needed in medical staff credentialing and malpractice insurance subsidies.

The key areas of potential risk under the Federal Anti-Kickback statute also arise from pharmaceutical manufacturer relationships with 3 groups: purchasers, physicians or other health care professionals, and sales agents. Activities that pose potential risk include discounts and other terms of sale offered to purchasers, product conversion, consulting and advisory payments. The pharmaceutical manufacturers and their employees and agents should be aware of the constraints the Anti-Kickback statute places on the marketing and promoting of products paid for by federal and state health care programs. To that end, the draft guidance recommends pharmaceutical manufacturers ensure that such activities fit squarely within one of the safe harbors under the Anti-Kickback statute. The Department of Health and Human Services has promulgated safe harbor regulations that protect certain specified arrangements from prosecution under the Anti-Kickback Statute.

Healthcare being one the most regulated of all sectors of commerce, it is important that all facts and circumstances with respect to the statutes and regulations are evaluated.